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Earnings warnings take futures lower

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Earnings warnings are taking their toll on stock futures this morning. Yesterday's after-the-bell warning from Nortel Networks (NYSE:NT) and projections for a net loss of $3.6 billion for the networking equipment giant will have some networking and telecom equipment stock coming under pressure. Yesterday, shares of NT closed at $5.29 and are trading at the $5 level in pre-market activity.

Shares of drug stock Eli Lilly (NYSE:LLY) are going to be under some selling pressure this morning as the company warns on earnings. Eli Lilly said earnings for its 4th-quarter will come in at the 59-61 cents a share range, where analysts had been expecting earnings closer to the 65 cent a share level. Lilly also warned that full-year 2002 would fall short of expectations and now expected earnings of $2.70-$2.80 a share. Analysts had forecast FY 2002 earnings for LLY at $2.94. The drug giant cited a "severe" erosion in prescriptions for its blockbuster drug Prozac as the main reason for its shortfall.

Eli Lilly Chart - last eleven months

Not long ago, we though shares of LLY were looking "short" on the rally to the 200-day MA near $80 (in the market monitor on OptionInvestor.com and profiled short for PremierMarkets.com), but the stock continued higher and we thought it best to stop out and keep losses small. This morning, it looks like shares of LLY will open near the $79 level and traders may once again want to trade shares of LLY with a bearish view.

Stock Futures

Stock futures are red this morning with S&P futures trading down 9 points to 1,046. NASDAQ futures are lower by 16 points to 1,147 and Dow futures are down 87 points to 8,880. Fair value for the S&P 500 today is $2.82. HL Camp & Company has their computer set for program buying at $4.08 and set for selling at $1.16. Fair value for the NASDAQ-100 today is $6.37.

Jeff Bailey
Senior Market Technician
Option Investor

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